The NDA government's new pension scheme 'Pradhan Mantri Shram Yogi Maan-Dhan 2019' announced in the interim budget on February 1 targets a workforce of around 420 million workers in the unorganized sector in both rural and urban regions in India. However, according to experts, the scheme has limitations that may impede its successful implementation.
Although many have called the new scheme a rehashed version of the old Atal Pension Yojana, the newer version provides marginally higher benefits to the workers. The first one being Rs 3,000 per month as against Rs 1,000 monthly pension earlier, but only to the workers who join the new scheme at the age of 18 against the monthly contribution of Rs 55 a month with the equal contribution by the government. The earlier version had a contribution of Rs 42 per month.
A look at some of the limitations of the new scheme:
1. Enrollments: The Atal Pension Yojana had a target of 20 million subscribers by 2015 end but, according to the official data, only 11 million workers were enrolled to the scheme by June 2018, a far cry from the targeted numbers. The new scheme targets around 10 million workers in a year with the total target of 100 million, but the basis of this estimation is still ambiguous.
2. Age ceiling: The new scheme keeps the age limit for subscriptions between 18 and 40 years. However, if you go by the numbers then according to census 2011, the unorganised sector employed around 420 million workers accounting for half of India's GDP. The census figures show around 30 per cent of the workforce above 40 years of age, that means, the new scheme keeps 126 million people out of its purview.
3. Interest incentive: Though the new scheme provides the workers more benefits than the erstwhile Atal Pension Yojana, the interest incentive needs to be looked at. While, the earlier scheme gave an interest rate of 7.5 per cent, the new scheme's interest rate is yet to be determined by the Insurance Regulatory Development Authority. It needs to be attractive enough for the workers to get any tangible future benefits.
4. Threshold Income: The new scheme keeps the threshold limit for a worker to qualify at Rs. 15,000 per month (workers earning more than Rs. 15,000 per month do not qualify for the new pension scheme). And there is skepticism if those earning a meagre amount of say Rs. 4,000 per month would part with their hard earned money to contribute towards the scheme.
5. Pension benefits: In case of the demise of the beneficiaries or any eventuality, the scheme does not extend the entitlement to their children, however, the spouse is eligible for the same. This is a concern that's yet to be addressed.